SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001 Commission file number 1-496
-------------------------
HERCULES INCORPORATED
A DELAWARE CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NO. 51-0023450
HERCULES PLAZA
1313 NORTH MARKET STREET
WILMINGTON, DELAWARE 19894-0001
TELEPHONE: 302-594-5000
Securities registered pursuant to Section 12(b) of the Act (Each
class is registered on the New York Stock Exchange, Inc.)
Title of each class
-------------------
Common Stock ($25/48 Stated Value)
8% Convertible Subordinated Debentures due August 15, 2010
9.42% Trust Originated Preferred Securities ($25 liquidation amount),
issued by Hercules Trust I and guaranteed by Hercules Incorporated
Preferred Share Purchase Rights
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements in Part III of this Form 10-K/A or any amendment to this Form 10-K/A.
X
As of March 15, 2002, registrant had 109,157,515 shares of common
stock, $25/48 stated value ("Common Stock") outstanding, which is registrant's
only class of common stock.
The aggregate market value of registrant's Common Stock held by
non-affiliates based on the closing price on March 15, 2002 was approximately
$1.3 billion.
DOCUMENTS INCORPORATED BY REFERENCE
(SPECIFIC PAGES INCORPORATED ARE IDENTIFIED UNDER THE APPLICABLE ITEM HEREIN.)
HERCULES INCORPORATED
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
BOARD OF DIRECTORS
The Company's restated certificate of incorporation and bylaws provide
for three classes of directors, with the term of one class expiring at each
annual meeting of the shareholders. Pursuant to the authority granted to the
Board in Article Six of the restated certificate of incorporation, the Board has
fixed the number of directors at 13: four in the class whose term expires in
2003, five in the class whose term expires in 2004 and four in the class whose
term expires in 2005.
William H. Joyce - Director since 2001
Dr. Joyce, age 66, joined Hercules as Chief Executive Officer in May
2001. Dr. Joyce had been Chairman, President and Chief Executive Officer of
Union Carbide Corporation since 1996. From 1995 to 1996, Dr. Joyce was President
and Chief Executive Officer and from 1993 to 1995, he was President. Prior to
that, Dr. Joyce had been Chief Operating Officer since 1992. Dr. Joyce holds a
B.S. degree in Chemical Engineering from Penn State University and a M.B.A. and
a Ph.D. from New York University. Dr. Joyce received the National Medal of
Technology Award in 1993 and the Plastics Academy's Industry Achievement Award
in 1994 and Lifetime Achievement Award in 1997. In 1997, he was inducted into
the National Academy of Engineering. Dr. Joyce is a director of CVS Corporation.
Dr. Joyce is also a trustee of the Universities Research Association, Inc. and
Co-Chairman of the Council of Government-University-Industry Research of the
National Academies. Dr. Joyce was Chairman of the Board of Society of Plastics
Industry and on the Executive Committee of the American Chemical Council.
Richard Fairbanks - Director since 1993
Mr. Fairbanks, age 61, has been a Counselor at the Center for Strategic
& International Studies since April 2000. He was named Senior Counsel at the
Center for Strategic & International Studies in February 1992, became Managing
Director of Domestic and International Issues in March 1994, and was President
and Chief Executive Officer from May 1999 until April 2000. He was
Ambassador-at-Large under President Reagan. He is a member of the Boards of
Directors of SEACOR Smit, Inc., GATX Corporation, and SPACEHAB, Inc.; member,
Council on Foreign Relations, Council of American Ambassadors; and founder, The
American Refugee Committee of Washington.
Samuel J. Heyman - Director since 2001
Mr. Heyman, age 63, has been a director and Chairman of International
Specialty Products Inc. since its formation and served as its Chief Executive
Officer from its formation until June 1999. He also has been a director of G-I
Holdings Inc., or its predecessor, GAF Corporation, for more than five years and
was Chairman, President and Chief Executive Officer of G-I Holdings and some of
its subsidiaries for more than five years until September 2000. In January 2001,
G-I Holdings filed a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code due to its asbestos-related claims. Mr. Heyman
was a director and Chairman of Building Materials Corporation of America
("BMCA"), an indirect wholly-owned subsidiary of G-I Holdings, which is
primarily engaged in the commercial and residential roofing business, from its
formation until September 2000, and served as Chief Executive Officer of BMCA
from June 1996 to January 1999 and from June 1999 to September 2000. He is also
the Chief Executive Officer, Manager and General Partner of a number of closely
held real estate development companies and partnerships whose investments
include commercial real estate and a portfolio of publicly traded securities.
Alan R. Hirsig - Director since 1998
Mr. Hirsig, age 61, was President and Chief Executive Officer of ARCO
Chemical Company, which was bought by Lyondell Chemical Company, from 1991 until
he retired in 1998. He is a director of Philadelphia Suburban Corporation,
Celanese A.G., and Checkpoint Systems Corporation. Additionally, he is a
director or trustee of Bryn Mawr College, Curtis Institute of Music, Rosenbach
Museum and Library and the YMCA of Philadelphia. Mr. Hirsig served as past
chairman of the Chemical Manufacturers Association.
Edith E. Holiday - Director since 1993
Ms. Holiday, age 49, is an attorney. She was Assistant to the President
of the United States and Secretary of the Cabinet from 1990 until early 1993 and
served as General Counsel of the U.S. Treasury Department from 1989 through
1990. She served as counselor to the Secretary of the Treasury and Assistant
Secretary for Public Affairs and Public Liaison, U.S.
2
HERCULES INCORPORATED
Treasury Department from 1988 to 1989. Ms. Holiday is a director of Amerada Hess
Corporation, Canadian National Railway, Digex Incorporated, H.J. Heinz Company,
Beverly Enterprises, Inc., RTI International Metals, Inc., and director or
trustee of various investment companies in the Franklin Templeton Group of
Funds.
Robert D. Kennedy - Director since 2001
Mr. Kennedy, age 69, held a number of executive and senior management
positions with Union Carbide Corporation, including Chairman, Chief Executive
Officer and President. He retired as Chairman from Union Carbide in 1995 after a
career that spanned 40 years. He is a member of the Boards of Directors of
Sunoco Inc., Kmart Corporation, International Paper Company and Chase
Industries, Inc.
Sunil Kumar - Director since 2001
Mr. Kumar, age 52, has been director, President and Chief Executive
Officer of International Specialty Products Inc. ("ISP") since June 1999. Mr.
Kumar has also been President and Chief Executive Officer of certain
subsidiaries of ISP, including ISP Investments Inc., since June 1999. Mr. Kumar
was a director, President and Chief Executive Officer of Building Materials
Corporation of America ("BMCA") from May 1995, July 1996 and January 1999,
respectively, until June 1999. He was Chief Operating Officer of BMCA from March
1996 to January 1999. He was also a director and Vice-Chairman of the Board of
G-I Holdings from January 1999 to June 1999. In January 2001, G-I Holdings filed
a voluntary petition for reorganization under Chapter 11 of the United States
Bankruptcy Code due to its asbestos-related claims.
Jeffrey M. Lipton - Director since 2001
Mr. Lipton, age 59, is President and Chief Executive Officer and a
Director of NOVA Chemicals Corporation. He joined NOVA in 1993 after retiring
from a 28-year career with the DuPont Company, where he held a number of
management and executive positions. He is a Chairman and Director of Methanex
Corporation and Trimeris, Inc., a member of the Board of Directors and Executive
Committee of the American Chemistry Counsel, and a member of the Board of
Directors and Business Council on National Issues - Canada.
Peter McCausland - Director since 1997
Mr. McCausland, age 52, has been the Chairman and Chief Executive
Officer of Airgas, Inc. (a distributor of industrial, medical, and specialty
gases and related equipment), a company he founded in 1982, since 1987. He
served as general counsel for MG Industries, Inc., an industrial gas producer.
He was a partner in the firm of McCausland, Keen & Buckman that specialized in
mergers, acquisitions, and financings. He is a director of the Independence
Seaport Museum and The Eisenhower Exchange Fellowships.
Gloria Schaffer - Director since 2001
Ms. Schaffer, age 71, served as a Commissioner of the Department of
Consumer Protection of the State of Connecticut from 1991 to 1995, as a member
of the Civil Aeronautics Board from 1978 to 1984 and as the Secretary of State
of the State of Connecticut from 1970 to 1978. Ms. Schaffer also previously
served on the Board of Directors of Amity Bank and Amity Bankcorp, Mott's Inc.
and Emery Air Worldwide and, since 1996, has served as a partner at C.A. White,
Inc., a real estate development firm. Ms. Schaffer is a director of MP 63 Fund
Inc.
Paula A. Sneed - Director since 1994
Ms. Sneed, age 54, is group vice president, president e-Commerce and
Marketing Services, Kraft Foods, Inc., the nation's largest packaged foods
company. She joined General Foods (which later merged with Kraft Foods) in 1977
and has held a variety of management positions, including vice president,
Consumer Affairs; senior vice president and president, Foodservice Division;
executive vice president and general manager, Desserts Division; executive vice
president and general manager, Dinners and Enhancers Division; senior vice
president, Marketing Services and chief marketing officer; and executive vice
president, president e-Commerce Division. She is also a director of Airgas, Inc.
and Charles Schwab & Co. Inc.
Raymond S. Troubh - Director since 2001
Mr. Troubh, age 75, has been a financial consultant for more than five
years. Prior to that he was a general partner of Lazard Freres & Co., an
investment banking firm, and a governor of the American Stock Exchange. Mr.
Troubh is a director of ARIAD Pharmaceuticals, Inc., a biopharmaceutical
company, Diamond Offshore Drilling, Inc., a contract drilling company, Enron
Corp., an energy, trading and distribution company, General American Investors
Company, an investment trust company, Gentiva Health Services, Inc., a
healthcare provider, Health Net, Inc., a managed healthcare company, Starwood
Hotels & Resorts, Inc., a hotel operating company, Triarc Companies, Inc., a
holding company, and WHX Corporation, a steel products company. He is also a
trustee of Petrie Stores Liquidating Trust.
Joe B. Wyatt - Director since 2001
Mr. Wyatt, age 66, is Chancellor Emeritus of Vanderbilt University in
Nashville, Tennessee. He served as Vanderbilt's sixth Chancellor and Chief
Executive Officer for 18 years, beginning in 1982. From 1972 to 1982, he was a
member of the
3
HERCULES INCORPORATED
faculty and administration at Harvard University. He is Chairman of the Board of
Directors of the Universities Research Association Inc. of Washington, D.C.,
Chairman of a panel on Strategic Education Research for the National Research
Council of the National Academies, a director of New American Schools, Inc.,
Advanced Network and Services, Inc., the EAA Aviation Foundation, Ingram Micro,
Inc., where he is Chairman of the Audit Committee, El Paso Corporation, the
Aerostructures Company and ASD.com. He is a Principal of the Washington Advisory
Group, LLC in Washington, D.C.
EXECUTIVE OFFICERS OF THE REGISTRANT:
The name, age and current position of each executive officer of
Hercules as of March 15, 2002 is reported in Part I, Item 3 under the caption
"Executive Officers of the Registrant" of Hercules' Form 10-K filed on March 29,
2002.
SECTION 16(A) BENEFICIAL REPORTING COMPANY COMPLIANCE:
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and holders of more than
10% of the Company's common stock to file with the SEC and the New York Stock
Exchange reports of beneficial ownership and changes in beneficial ownership of
the common stock and other equity securities of the Company. These persons are
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms they file. Based solely on a review of the copies of those reports
furnished to the Company, the Company believes that, during 2001, its directors,
executive officers and holders of more than 10% of the Company's common stock
complied with all applicable Section 16(a) filing requirements.
ITEM 11. EXECUTIVE COMPENSATION:
COMPENSATION OF DIRECTORS
Employee directors receive no additional compensation other than their
normal salary for serving on the Board or its Committees.
Non-employee directors receive a $16,000 annual fee, $1,000 for each
meeting attended, $3,000 for chairing a committee, $1,000 per day for special
assignments and reimbursement for out-of-pocket expenses. The annual fee was
reduced from $23,000 to $16,000 by the Board of Directors in August 2001.
NON-EMPLOYEE DIRECTOR STOCK ACCUMULATION PLAN. In 2001, as in past
years, non-employee directors had the right to elect to receive restricted stock
or equivalent options in lieu of part or all of their fees under Hercules'
Non-Employee Director Stock Accumulation Plan (the "NEDSAP"), which expired on
April 30, 2001. Restricted stock issued pursuant to the NEDSAP is restricted
until the holder's retirement from the Board and is valued at 85% of the fair
market value of the Company's common stock. Options issued pursuant to the
NEDSAP are valued using the Black-Scholes formula.
Also under the NEDSAP, each director annually receives a nonqualified
stock option to purchase 3,000 shares of common stock. The option exercise price
is the fair market value of Hercules' common stock on the date of grant. As each
non-employee director received an accelerated grant of 9,000 stock options in
1998 for the next three years, the only grants made during 2001 were grants to
the newly elected directors, who received 3,000 options each. Vesting occurs in
three equal annual increments beginning one year after the grant date.
EQUITY AWARD. Each director has a one-time opportunity to purchase 750
Hercules common shares at fair market value when first elected to the Board.
Upon the purchase, Hercules awards an additional 1,500 Hercules common shares
that cannot be transferred until retirement or resignation from the Board.
RESTRICTED STOCK UNITS. Upon election to the Board, each director
receives 1,100 restricted stock units, which are placed in an unfunded account
where, to the extent that dividends on the Company's common stock are or have
been paid, they accrue dividend equivalents and interest. Each restricted stock
unit represents the right to receive one Hercules common share at retirement.
Restricted stock units do not carry any voting rights. Of the 1,100 units, 200
immediately vest. Thereafter, for every year served on the Board, 100 additional
units vest. Upon retirement from the Board, all vested restricted stock units
are paid in Hercules common shares in a lump sum or spread over a period not to
exceed ten years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of five members: Messrs. Lipton,
McCausland (Chairman) and Troubh and Mss. Holiday and Sneed. None of the members
of the Compensation Committee is an officer, employee or former officer or
employee of the Company or its subsidiaries. In 2001, none of the members of the
Compensation Committee had any relationship requiring disclosure in accordance
with Item 402(j)(3) of Regulation S-K of the SEC.
4
HERCULES INCORPORATED
COMPENSATION OF EXECUTIVE OFFICERS
The following table contains information concerning compensation paid
or to be paid to those serving as Chief Executive Officer and the other most
highly compensated executive officers of the Company for services rendered to
the Company and its subsidiaries during the past three completed fiscal years.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------- ----------------------------- ALL OTHER
SALARY BONUS RESTRICTED OPTIONS INCENTIVE COMPENSATION
YEAR $ $ OTHER ($) STOCK(4)($) (SHARES) PAYOUTS($) (5)($)
---- - - --------- ----------- -------- ---------- ------
W. H. Joyce(1) 2001 $ 666,667 $ 997,500 $ 5,662 1,250,000 $ 10,126
Chief Executive Officer and 2000
Chairman 1999
T. L. Gossage 2001 (2) 97,742
Former Chief Executive Officer 2000 (2) 27,995 $1,848,043 1,000,000 63,588
and Chairman 1999
I. J. Floyd 2001 383,340 125,186 35,500 13,242
Executive Vice President, 2000 383,340 24,029 256,000 50,000 9,926
Secretary, and General Counsel 1999 225,259 3,110 517,000 9,375 10,647
C. A. Rogerson 2001 257,928 200,000 4,631 35,500 7,772
Vice President/General Manager 2000 157,614 114,742(3) 45,500 4,375
BetzDearborn Division 1999
M. Sonneveld 2001 248,340 178,288 35,500 9,551
Vice President 2000 240,000 10,653(3) 35,500 13,338
Manufacturing & Work Processes 1999 240,000 21,000 10,933
R. C. Flexon 2001 248,000 175,000 35,500 5,100
Vice President, Corporate Affairs, 2000 138,182 58,181(3) 93,750 30,700 3,000
Strategic Planning and Work Processes 1999
(1) Dr. Joyce became Chief Executive Officer on May 8, 2001.
(2) Mr. Gossage received a nominal salary of $1.00/week for benefit
participation purposes. Mr. Gossage received no other cash compensation
(base or annual incentive). The "Other" column includes $37,353 for use
of the Company plane which has since been sold. Mr. Gossage retired as
Chief Executive Officer on May 8, 2001.
(3) Messrs. Rogerson, Sonneveld and Flexon's "Other" columns include taxes
and relocation expenses paid by the Company.
(4) These values are determined by multiplying the number of shares of
restricted stock awarded by the closing market price of Hercules'
common stock on the date of grant and subtracting the consideration, if
any, paid by the executive officer. Dividends may be paid on a current
basis or accrued. Mr. Floyd's restricted stock grant for the year 2000
will vest only if Hercules' stock price reaches $50 before November 4,
2002. The number and value (determined by taking the number of shares
of restricted stock multiplied by the year-end closing market price,
$10.00, net of any consideration paid) of aggregate restricted stock
holdings is shown below. Included in the chart are restricted shares
that each executive officer purchased under the terms of the Hercules
Long-Term Incentive Compensation Plan, as well as shares that have been
granted outright. The aggregate amount paid for restricted shares by
executive officers was $104,500.
Aggregate Restricted
Shares Net Value
------ ---------
W. H. Joyce - -
T. L. Gossage - -
I. J. Floyd 41,553 $380,000
C. A. Rogerson - -
M. Sonneveld - -
R. C. Flexon 5,000 50,000
(5) Major components of All Other Compensation are listed below.
Company Match Interest
(Defined Credits On
Contribution Stock
Plans) Options
------ -------
W. H. Joyce $ 10,126 -
T. L. Gossage - -
I. J. Floyd 13,242 -
C. A. Rogerson 7,772 -
M. Sonneveld 8,294 $1,257
R. C. Flexon 5,100 -
5
HERCULES INCORPORATED
OPTION GRANTS IN LAST FISCAL YEAR
The following table discloses information concerning individual grants
of stock options made during the last completed fiscal year to the executive
officers named in the summary compensation table.
PERCENT OF
NO. OF SECURITIES TOTAL OPTIONS EXERCISE OR
UNDERLYING GRANTED TO BASE PRICE EXPIRATION GRANT VALUE GRANT DATE
NAME OPTIONS GRANTED EMPLOYEES ($/SHARE) DATE DATE VALUE(1)
W. H. Joyce 1,250,000(2) 44.9% $ 12.00 5/9/2011 5/8/2001 $7,704,000
T. L. Gossage 0
I. J. Floyd 35,500(3) 1.3% 11.28 8/23/2011 8/23/2001 202,769
C. A. Rogerson 35,500(3) 1.3% 11.28 8/23/2011 8/23/2001 202,769
M. Sonneveld 35,500(3) 1.3% 11.28 8/23/2011 8/23/2001 202,769
R. C. Flexon 35,500(3) 1.3% 11.28 8/23/2011 8/23/2001 202,769
(1) The Black-Scholes option-pricing model was used to determine the
fair value of employee stock options in the table above as of the
date of the grant. In the fourth quarter of 2000, the Board of
Directors approved suspension of the Hercules' common stock
dividend. Had the historical dividend rate continued to be
valued in the Black-Scholes option-pricing model, the value of
Dr. Joyce's grant would have been $4,220,665. Other grants reported
herein would be similarly adjusted downward.
No adjustments for risk of forfeiture have been made. Significant
assumptions are as follows:
REGULAR OPTIONS
Dividend yield 0.0%
Risk free interest rate 5.3%
Expected life 8.0 years
Expected volatility 35.6%
(2) Vesting date is the earliest of April 30, 2003; any "change in
control"; death; disability; or termination other than for cause.
(3) Vesting schedule is as follows: 40% on 8/23/2002; 40% on
8/25/2003; 20% on 8/23/2004.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The table set forth below discloses certain information concerning the
exercise of stock options (exercised and unexercised) during the last completed
fiscal year by the executive officers named in the summary compensation table as
well as certain information concerning the number and value of unexercised
options. The value of options is calculated using the difference between the
option exercise price and $10.00 (year-end stock price) multiplied by the number
of shares underlying the option.
No. of No. of Securities Value of Unexercised
Shares Value Underlying Unexercised In-The-Money Options
Acquired on Realized Options at Year-End At Year-End
Name Exercise $ Exercisable Unexercisable Exercisable ($) Unexercisable ($)
W. H. Joyce - - - 1,250,000 - -
T. L. Gossage (1) - - 1,438,000 - - -
I. J. Floyd 4,500 900 103,000 112,375 - -
C. A. Rogerson - - 18,200 62,800 - -
M. Sonneveld - - 101,700 142,050 - -
R. C. Flexon - - 12,280 53,920 - -
(1) Mr. Gossage retired from the Company effective May 8, 2001. As a result
of his retirement, 1,000,000 of his options became exercisable as of May
8, 2001.
6
HERCULES INCORPORATED
PENSION PLANS
The following table shows the estimated annual pension benefits payable
to a covered participant at normal retirement age under Hercules' qualified
benefits pension plan, as well as nonqualified supplemental benefits, based on
the stated remuneration and years of service with Hercules and its subsidiaries.
------------------------------------------------------------------------------------------------------------------
REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
------------------------------------------------------------------------------------------------------------------
$ 200,000 $ 45,588 $ 60,784 $ 75,980 $ 91,176 $ 106,372
250,000 57,588 76,784 95,980 115,176 134,372
300,000 69,588 92,784 115,980 139,176 162,372
350,000 81,588 108,784 135,980 163,176 190,372
400,000 93,588 124,784 155,980 187,176 218,372
450,000 105,588 140,784 175,980 211,176 246,372
500,000 117,588 156,784 195,980 235,176 274,372
600,000 141,588 188,784 235,980 283,176 330,372
700,000 165,588 220,784 275,980 331,176 386,372
800,000 189,588 252,784 315,980 379,176 442,372
900,000 213,588 284,784 355,980 427,176 498,372
1,000,000 237,588 316,784 395,980 475,176 554,372
1,500,000 357,588 476,784 595,980 715,176 834,372
2,000,000 477,588 636,784 795,980 955,176 1,114,372
------------------------------------------------------------------------------------------------------------------
Annual contributions by Hercules to its qualified pension plan, if any
are required, are determined statistically by an independent actuary, and no
amount is attributed to an individual employee. Due to the funded status of the
Pension Plan, there was no Hercules contribution to the Pension Plan in 2001.
Except in special cases, the aggregate retirement benefit, under both
the qualified and nonqualified plans, is an amount determined by taking the sum
of (i) 1.2% of the employee's average annual earnings (based on the highest five
consecutive years during the last 10 years of employment) up to one-half the
Social Security Tax Base ($40,200 in 2001), and (ii) 1.6% of the employee's
average annual earnings (as determined above) in excess of one-half of the
Social Security Tax Base, multiplied by the employee's total years and months of
credited service. For this purpose, "average annual earnings" consist of salary
plus annual incentive or bonus compensation.
For Dr. Joyce and Messrs. Flexon, Floyd, Gossage, Rogerson and
Sonneveld, compensation used for calculating retirement income benefits consists
of the highest 5 consecutive years of average monthly earnings. These amounts
for 2001 are shown under the "Salary" and "Bonus" columns of the Summary
Compensation Table. The estimated credited years of service for Dr. Joyce and
Messrs. Flexon, Floyd, Gossage, Rogerson, and Sonneveld are 0, 1, 28, 36, 19 and
34, respectively.
EMPLOYMENT CONTRACTS
On May 8, 2001, Hercules entered into a written employment agreement
with Dr. Joyce which provides for him to serve as Chairman and Chief Executive
Officer. Under the agreement, Dr. Joyce's initial compensation consists of (i) a
base annual salary of $1,000,000, (ii) target annual variable compensation of
$1,000,000 and (iii) a grant of stock options to acquire 1,250,000 shares of
common stock at a per share exercise price of $12.00 (the price of Hercules'
common stock on the date of grant). The stock options have ten-year terms and
vest at the earliest of April 30, 2003, a "change in control", death, disability
or termination other than for cause. Dr. Joyce's employment agreement also
provides for further grants of stock options for each calendar year after 2001,
at such times as Hercules generally makes stock option grants to other employees
and in amounts and with terms and conditions consistent with his position. In
the event Dr. Joyce's employment is terminated other than for cause, Hercules
would be required to pay him an amount equal to the base salary and variable
compensation he would have received had he remained employed through April 30,
2003, but not less than $2,000,000.
7
HERCULES INCORPORATED
CHANGE IN CONTROL AGREEMENTS
Since 1986, Hercules has entered into change in control agreements with
its senior executives. These agreements seek to ensure the stability of
Hercules' management during a period of transition within Hercules and only
become effective upon a change in control event. Hercules' Compensation
Committee periodically reviews these agreements and revises them, if necessary,
to reflect contemporary business practices in change in control situations.
Change in Control Agreements are in force for Dr. Joyce and Messrs.
Flexon, Floyd, Rogerson and Sonneveld. These Agreements provide that a change in
control occurs:
o if any individual, entity or group (with certain exceptions) becomes
the beneficial owner of 20% or more of the outstanding shares of Hercules common
stock;
o if there is a change in a majority of the board of directors other
than by election or nomination by a vote of the majority of directors comprising
the incumbent board;
o upon approval by the shareholders of a reorganization, merger,
consolidation or sale that results in Hercules' shareholders owning less than
60% of the combined voting power of the surviving corporation following the
transaction; or
o if Hercules' shareholders approve a complete liquidation of the
Company.
Under the terms of these agreements, upon a change in control, Hercules
or its successor is required to continue to employ the above named executives,
in substantially the same position and level of compensation (including
benefits) as that executive held immediately before the change in control, for a
period of three years following the change in control.
Under the terms of these agreements, as amended in 2001, if Hercules or
its successor terminates the executive (within the three year period following a
change in control) for any reason other than cause, death or disability, or if
Hercules or its successor takes actions which permit the executive to terminate
his or her employment for good reason, such as diminishing the executive's
responsibilities or requiring the executive to relocate, during such three year
period, the executive is entitled to the following:
o a lump sum cash payment equal to:
- any unpaid prorated portion of the executive's target
bonus or, if greater, the most recent bonus received
by the executive;
- any monthly salary earned but unpaid as of the date
of termination;
- three times the executive's base salary and bonus;
and
- the difference between the amount the executive would
be entitled to if Hercules or its successor
contributed to the executive's retirement plan for up
to three additional years of service (in addition to
the years of service credited during the employment
period) and three additional years of age and that
amount the executive was actually entitled to under
this plan on the date of termination;
o three years of continued welfare benefits and perquisites;
o outplacement services at a cost of up to $50,000;
o full vesting of all stock options and restricted stock held by
or previously granted to the executive; and
o payment for any Internal Revenue Service excise taxes for
"excess parachute payments" (as defined under the Internal
Revenue Code).
Dr. Joyce's change in control agreement also provides that if he
terminates his employment on at least 180 days' advance notice after a change of
control and, in the case of a change in control triggered by shareholder
approval of a reorganization, merger, consolidation or sale described above,
after consummation of that transaction, the termination will be treated as a
termination for good reason, giving rise to the severance pay and benefits
described above.
The agreement entered into with Dr. Joyce does not provide for the
additional pension service or age credits described above.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information, as of March 31, 2002, with
respect to the beneficial ownership of Hercules common shares by
o beneficial owners of more than five percent of Hercules common stock,
o each Hercules director and nominee for director,
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HERCULES INCORPORATED
o each of the executive officers named in the Summary Compensation Table,
and
o all directors, nominees and executive officers of Hercules as a group.
This beneficial ownership is reported in accordance with the rules of
the SEC, under which a person may be deemed to be the beneficial owner of shares
if that person has or shares the power to vote or dispose of those shares or has
the right to acquire beneficial ownership of those shares within 60 days (for
example, through the exercise of an option). Accordingly, the shares shown in
the table as beneficially owned by certain individuals may include shares owned
by certain members of their respective families. Because of these rules, more
than one person may be deemed to be the beneficial owner of the same shares. The
inclusion of the shares shown in the table is not necessarily an admission of
beneficial ownership of those shares by the person indicated.
OPTIONS
SHARES EXERCISABLE
Beneficially Within 60 Restricted Percent of
Name Owned (1) Days Stock Units Shares (2)
------------------------------------------------- -------------- --------------- -------------- ------------
DIRECTORS AND OFFICERS
W. H. Joyce, Director and Officer (3) 24,509 - - *
R. Fairbanks, Director 21,059 24,000 1,253 *
R. C. Flexon, Officer 10,682 12,280 - *
I. J. Floyd, Officer 65,059 123,000 - *
T. L. Gossage, Director and Officer (4) 129,003 1,000,000 -
S. J. Heyman, Director 9,888,200 - 1,100
A. R. Hirsig, Director 6,554 9,000 1,100 *
E. E. Holiday, Director 3,999 21,000 1,376 *
R. D. Kennedy, Director 10,000 - 1,100 *
S. Kumar, Director 17,108 - 1,100 *
J. M. Lipton, Director 16,039 - 1,100 *
P. McCausland, Director 17,234 12,000 1,100 *
C. A. Rogerson, Officer 7,640 36,400 - *
G. Schaffer, Director 2,750 - 1,100 *
P. A. Sneed, Director 11,925 21,000 1,253 *
M. Sonneveld, Officer 9,449 115,900 - *
R. S. Troubh, Director 14,870 - 1,100 *
J. B. Wyatt, Director 4,350 - 1,100 *
All directors and executive officers as a group 10,384,061 1,853,000 13,782
5% SHAREHOLDERS
International Specialty Products, Inc. (5) 9,894,800 - - 9.1
ISP Investments Inc.
ISP Opco Holdings, Inc.
C/o ISP Management Company, Inc.
1361 Alps Road
Wayne, New Jersey 07670
Mario J. Gabelli and related entities (6) 10,395,000 - - 9.5
C/o Gabelli Asset Management Inc.
One Corporate Center
Rye, New York 10580
T. Rowe Price Associates, Inc. (7) 7,643,260 - - 7.0
100 E. Pratt Street
Baltimore, Maryland 21202
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HERCULES INCORPORATED
* Less than 1% of the outstanding Hercules common shares.
1. Includes shares, as of April 1, 2002, in the Hercules Savings and
Investments Plan as follows: R. C. Flexon, 711; I. J. Floyd, 1,840; C.
A. Rogerson, 849; and M. Sonneveld, 2,736; and all directors and
officers as a group, 30,907. Includes shares with restrictions and
forfeiture risks as specified under the Long-Term Incentive
Compensation Plan; W. H. Joyce, 24,509; R. C. Flexon, 9,971; I. J.
Floyd, 38,000; C. A. Rogerson, 6,956; and M. Sonneveld, 1,683; and
all directors and officers as a group, 118,766. Owners have the same
voting and dividend rights as other shareholders of Hercules, but no
right to sell or transfer. Included in the non-employee directors'
total is a one-time equity award.
2. Based on 109,186,602 shares outstanding on March 31, 2002.
3. Named Chief Executive Officer effective May 8, 2001 and Chairman
effective July 1, 2001.
4. Retired as Chief Executive Officer on May 8, 2001 and as Chairman
effective July 1, 2001.
5. Share holding as of February 28, 2002, as reported on the Form 4 filed
by such shareholder.
6. Share holding as of February 14, 2002, as reported on Amendment No. 3
to the Schedule 13G filed by such shareholder.
7. Share holding as of November 19, 2001, as reported on Amendment No. 5
to the Schedule 13D filed by such shareholder.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
In 2001, no director, executive officer or beneficial owner of more
than five percent of Hercules' common stock had an involvement in such
transactions of a nature or magnitude to require disclosure under the applicable
SEC thresholds.
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HERCULES INCORPORATED
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on April 30, 2002.
HERCULES INCORPORATED
By: /S/ Fred G. Aanonsen
----------------------------------------
Fred G. Aanonsen
Vice President and Controller
(Principal Financial Officer and duly
authorized signatory)
April 30, 2002
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